OREANDA-NEWS. November 16, 2015. The Central Bank is today proposing a range of increased protections for variable rate mortgage holders. The proposals, which are outlined in a Consultation Paper entitled ‘Increased Protections for Variable Rate Mortgage Holders‘, include the following:

Statement of factors impacting on the rate

Lenders would be required to prepare and publish a summary statement of the factors that impact on the calculation of their variable rate and their criteria and procedures applicable to the setting of such rates.

This summary statement would be provided to borrowers when they are offered a variable rate mortgage and made available on the lender’s website on an on-going basis. Lenders would be required to notify affected borrowers of changes to the statement and make available an updated summary on the lender’s website.

Information about other mortgage options

Lenders would be required to notify variable rate borrowers of alternative mortgage options available from their lender on an annual basis and also when notifying borrowers of an increase in the variable interest rate.  This would include a link to the relevant section of the website of the Competition and Consumer Protection Commission (www.consumerhelp.ie) in order to assist consumers wishing to switch mortgage providers. 

Notice of forthcoming interest rate increases

Currently, lenders are required to give at least 30 days’ notice of a forthcoming variable rate increase. The Central Bank is consulting on the need for a longer notification period for rate increases in order to give borrowers more time to consider their options and switch to a different product. The Central Bank is also consulting on a proposal to require the lender to state the reason for the rate change. 

Director of Consumer Protection, Bernard Sheridan, said:  “We believe there is scope for increasing the level of transparency of mortgage rates. The measures we are proposing today are aimed at increasing transparency and facilitating consumer choices.

Taking out a mortgage is one of the biggest decisions a consumer will make in their lives and it is essential that they can deal with regulated lenders with confidence, that the process is transparent and their interests are protected.  In the case of variable rate mortgages, this means lenders must be clear with the borrower about the variable nature of the loan and the factors that might cause that rate to change. They should also give borrowers sufficient notice and information to enable the borrower to switch to a different product where they wish to do so.”

Submissions to the consultation paper, along with comments and queries, can be made by email to code@centralbank.ie and the closing date for submissions is 12 February 2016. All submissions will be published on www.centralbank.ie.

ENDS

Notes to editors

For the purposes of this consultation paper, ‘variable rate mortgages’ refer to mortgages where the rate can be changed at the lender’s discretion.

In July 2015, the Central Bank published research into switching mortgages in the Irish market, which concluded that increased information and greater transparency on mortgage products and switching options would be beneficial.

The Competition and Consumer Protection Commission provides independent information on mortgage switching here, including a mortgage switching tool. This tool is very useful for consumers as it can be hard to compare rates across different providers. The tool shows the difference between what a borrower is paying and what is available in the market, per month and over the lifetime the mortgage.